My Top 10 Energy Stories of 2014

There was an energy story that stood head and shoulders above all the rest in 2014, but no clear runner-up. After the #1 entry on the list below, the rest of the Top 10 is highly debatable. I don’t think there is a consensus #2 story, and I don’t believe there is a well-defined Top 10.

But I do believe there is a clear #1. Here are my choices for the Top 10 energy stories of 2014, followed by about 15 more that could have easily been on the list. Feel free to chime in with any major stories I have missed.

1. Crude oil prices collapse

On July 30, West Texas Intermediate (WTI) closed at $104.29 per barrel (bbl). The next day it suffered a sharp decline below $100/bbl. As the year comes to an end, WTI has dropped below $55/bbl. The last time oil was this cheap was during the global financial crisis six years ago.

In fact, from the end of 2008 until mid-2014 energy stocks experienced a long bull market. Many oil producers saw their share price double and triple as oil found a home around $100/bbl. High oil prices put the brakes on the world’s oil-dependent economies. But as oil consumption fell in developed countries, the increase in demand from developing countries more than offset these declines, pushing global consumption higher. Eventually the U.S. shale oil revolution put enough oil on the market that supply growth started to outstrip the rate of increase in demand. Once the market recognized that Saudi Arabia would not cut its output to accommodate the shale producers, panic selling ensued. The nearly 50% decline in the price of WTI and Brent crudes is a sea change with far-reaching consequences. (For those who believe that demand declines are driving the price of oil down, note that global oil demand has increased 4 years in a row).

2. World sets new energy consumption records

I could have put any number of stories in the second spot, and the rest of the top five is pretty interchangeable. There were stories that were directly a result of the oil price crash (e.g., gasoline prices below $2/gallon in parts of the country; oil companies slashing capital budgets for next year) and stories that helped exacerbate the price decline (e.g., OPEC failing to cut production to prop up declining oil prices). I could have come up with a top five that was entirely related to the oil price crash.

But I thought the continued dominance of fossil fuels was worthy of the 2nd spot. The release of the 2014 BP Statistical Review showed new consumption records for oil, natural gas and coal. These three fossil fuels were responsible for nearly 87% of the world’s primary energy consumption. Fossil fuel consumption continued to decline in the European Union, while U.S. consumption rose for the first time in several years. Every developing region of the world continues to increase their fossil fuel consumption, which more than offset the declines in the developed regions.

3. Coldest U.S. winter in years drives energy prices higher

Last winter’s series of polar vortices caused U.S. natural gas inventories to be drawn down to their lowest levels in more than a decade. The overall winter draw on natural gas was also the largest in history, causing price spikes not only for natural gas but propane and heating oil as well. Natural gas inventories ended the winter withdrawal season about 50% below normal for that time of year, but a mild summer and record natural gas production allowed inventories to return nearly to normal for the 2014-2015 winter withdrawal season.

4. Continuing boom in U.S. crude oil and natural gas production

The fracking boom rolled on, with US oil production growing at the fastest pace in the country’s history and reaching the highest levels in nearly 30 years. North Dakota became the fifth state in the nation to see its oil production climb above the 1 million barrel per day mark. U.S. natural gas production continued to set new all-time highs thanks to the prolific Marcellus Shale, where output topped 15 billion cubic feet per day (Bcf/d).

5. EPA phasing out coal-fired power

This is a trend with big ramifications for U.S. electricity producers. In June the U.S. Environmental Protection Agency (EPA) released the Clean Power Plan proposal, which for the first time mandates carbon emission cuts from legacy power plants. The new regulations would require such plants to cut emissions by up to to 30% by 2030 from 2005 levels. Many coal plants will be unable to meet these new restrictions, and previous rules have imposed even more stringent limits on new coal-fired projects. The bottom line is that coal-fired power will continue to decline in the U.S. and could be phased out completely as a result of the new emission requirements.

6. While the U.S. saw uncommonly cool temperatures, The World Meteorological Organization projected that 2014 will go down as the hottest year on record for the planet.

7. Total (NYSE: TOT) CEO Christophe de Margerie was tragically killed when his private jet hit a snow plow as it was taking off from Moscow’s Vnukovo airport.

9. Mexican President Peña Nieto signed into law sweeping reforms designed to transform Mexico’s energy and electricity sectors by encouraging private investment.

10. Russia and China signed natural gas agreements that would send 68 billion cubic meters of Russian natural gas annually to China. This amounts to more than 10% of Russia’s current gas production.

I have seen the 60 Minutes story The Cleantech Crash — in which I appeared back in January 2014 — popping up on some energy lists as one of the top stories. I don’t think that would make my list, but the following are arguably worthy of Top 10 consideration:

Tesla Motors announced that Nevada will be the official site for the Tesla Gigafactory, the world’s largest and most advanced battery factory

The combination of a corruption scandal, the subsequent announcement that the company would delay earnings announcements by a month, the reelection of Dilma Rousseff as the country’s president, and plummeting oil prices sent the price of Brazilian oil giant Petrobras (NYSE: PBR) down nearly 50% for the year, to a level that hasn’t been seen in a decade.

The U.S. and China made a joint announcement that sets new carbon dioxide emission targets for the U.S., while China said it would try to reach its emissions peak by 2030.

The U.S. Environmental Protection Agency announced that it would not be able to issue a final renewable fuel standard for 2014 by the end of the year.

Halliburton (NYSE: HAL) agreed to buy Baker Hughes (NYSE: BHI) for about $35 billion in cash and stock, creating an oilfield services giant rivaling Schlumberger (NYSE: SLB) in size if not in margins.

Argentine lawmakers passed reforms designed to attract more investment in the country’s oil and gas industry.

Whiting Petroleum (NYSE: WLL) agreed to purchase Kodiak Oil & Gas (NYSE: KOG) to become the largest operator in the Bakken shale formation.

A two-year federal study concluded that fracking was not responsible for water contamination, but that the loss of well integrity had in some cases allowed contamination to occur.

The Obama Administration moved in the direction of loosening the ban on crude oil exports when it approved exports of minimally processed oil condensate for Pioneer Natural Resources (NYSE: PXD) and Enterprise Product Partners (NYSE: EPD).

The US Energy Information Administration (EIA) downgraded its estimate of recoverable oil in the Monterey Shale by 96%.

BP (NYSE: BP) suffered a number of legal blows, including an appeals court in New Orleans rejecting BP’s request to temporarily halt payments to businesses that can’t prove they were directly damaged by the 2010 Gulf of Mexico oil spill.

Two separate scientific teams concluded that the collapse of the Western Antarctic ice sheet is under way and inevitable, and could ultimately lead to a global sea rise of more than 10 feet.

“For those who believe that demand declines are driving the price of oil down, note that global oil demand has increased 4 years in a row”

However, I dom’t recall to have seen this argument being advanced by anyone discussing current oil price declines! On the demand side, observers are merely noting that the increase in world oil consumption in 2014 is set to be weak at best. On 12 December, IEA was estimating a y-o-y increase in world oil demand of just 670,000 barrels a day in 2014, the lowest increase since 2000/2001 according to BP data barring the 2008-2009 declines, and about half the average annual increase in the last 3 years (+1.2 million barrels / day each year).
For 2015, IEA is estimating a small acceleration of global consumption to +900,000 barrels, partly driven precisely from lower oil prices.
So, I believe demand dynamics are interacting with supply-side pressures, though the latter appear stronger. Ascribing clear-cut relative effects to supply- and demand-side pressures is tricky precisely because they are both present in the current oil price downward pressures (together, probably, with panicky reactions in the short term).

“However, I dom’t recall to have seen this argument being advanced by anyone discussing current oil price declines!”

Believe me, some of the old Oil Drum crowd has been proposing exactly this theory. That the reason oil prices are going down is because countries can’t afford it. In fact, I saw one the other day say “See, this is exactly what we have been saying would happen.” I pointed out that demand was still rising, and didn’t get a response back.

Thanks a lot for the reply – that was quick! Clearly some commenters at the Oil Drum were/are crazier than their hosts.

But back to real-world dynamics, what about weak demand pressures in general? Don’t you think that, say, surprisingly weaker growth in China early next year might depress demand further, albeit slightly?

Just to anticipate my prior belief before your answer, I think that prices have overcompensated in the last months and I expect a gradual climb in the first half of next year. But I also think that weaker China growth data could be a huge shock for the market, and this could ultimately postpone upward adjustments further out in the year, or even to 2016.

(But I guess I will wait for your 2015 predictions – I expect them to be much trickier than this year’s! )

In a strange sort of way that they do not seem to understand, the oil Peak Oil crowd is right.

OIl demand, according to the BP annual report, has been falling in Europe and Japan since the early 1980s. With the $100 oil price that was sustained until recently, then oil demand began to fall in the U.S. too.

So, relatively, oil demand has been falling. I am using the word “relatively.” This is the normal price signal at work, and a good sign.

I do not know why the Peak OIl crowd cannot understand the price signal, and that it will effectively prevent any sort of off-the-cliff Peak Oil disaster from happening. So much new oil supply or conservation, and substitution is encouraged. Now we are glutted.

It is not true the oil glut was only caused by American oil drillers (who I admire). It is also caused by generations of conservation in Europe and Japan, and the beginnings of conservation in the US.

There would be tremendous gobs of even more oil on the market, if Libya, Nigeria, Iraq, Iran, Venezuela, Mexico, and Russia were not such terrible thug states. The other oil-producers, Saudi Arabia, UAE, Kuwait etc are hardly better.

It is looking more and more true that somewhere in the next 25 years, due to other technologies, people will start migrating away from oil. Batteries, fuel cells, etc. Personally, I look froward to that day, as one when city air will get a lot cleaner. Of course, that may be past my expiration date, but….

Energy trend after 2014
New energy sources are under way, even currently suppressed, and will bring new energy and transportation technology. Very powerful, affordable energy allowing eliminate pollution from two major sources and bring employment and prosperity by manufacturing of devices used by those sources.
Oil should be used only by chemical industry, and coal only by steel industry for making steel. This TREND should be supported by UN, away from endless discussions for pollution targets, carbon tax and other similar ideas.

Thanks, nice list, though I have a quibble with #5. “The bottom line is that coal-fired power will continue to decline in the U.S. and could be phased out completely as a result of the new emission requirements.”

“Completely” is quite an exaggeration compared to EIA forecasts which estimate only about 20% of coal generating capacity to be retired in the next 10 to 25 years.

http://www.eia.gov/todayinenergy/detail.cfm?id=15031
“The Annual Energy Outlook 2014 (AEO2014) Reference Case projects that a total of 60 gigawatts (GW) of capacity will retire by 2020, which includes the retirements that have already been reported to the U.S. Energy Information Administration… At the end of 2012 there were 1,308 coal-fired generating units in the United States, totaling 310 GW of capacity. In 2012 alone, 10.2 GW of coal-fired capacity was retired”

Hm. I should have looked more closely at the date. I expect though, that the next one won’t show any where near a complete phase out either. Considering it’s only 30% emissions reduction a 30-50% coal plant closure might be more likely.

The 30% emissions reduction is based on 2005 emissions and we’re already down a bit from there.

Here’s a study done for the National Mining Association. It estimates retirement of only about 20% of coal generation capacity.

http://www.countoncoal.org/assets/Executive-Summary-EPA-Clean-Power-Plan-Costs-Impacts.pdf
“Without any carbon regulation, the power industry would retire by 2020 about 49 GW of coal-fired generating capacity due to other recent EPA regulations, such as MATS and Cooling Water Intakes (316(b)), as shown in Exhibit 4.3. With the CPP in place as proposed, the power industry is expected to accelerate retirements of an additional 12 GW of coal-fired and 7 GW of oil/gas steam capacity by 2020.”

Nice list, Robert! If you would have told me in 2008 we would experience a price collapse going into 2015, I would have thought you were off your rocker! Just goes to show, while the peak continues to creep closer, there are still some unknowns and surprises.

How about the schizo federal control of energy? Seems were a fractured national unable to compromise and set a course for countries long term benefit. All players currently running with money in hand to DC political control to gain favor. The science is just another tool to manipulate facts. The oil industry has invested hundreds of millions within the endeavor. Environmentalist will not compromise and appear to only self inflate. Utilities, investors, and business currently just waiting for someone to lead nation per workable solutions. Politicians continue to sit with hand out gaming as much political funding as possible per the important decisions to be made. Executive department doesn’t trust private sector and loaded with idealism fallacy of the value of his abilities and insights. Everyone seems to be waiting for another administration to clean up the mess. That’s a strategy?

A paper published in the Proceedings of the NAS of the USA, Nov 2014, D. Schimeil et al. reveals that the global rain forests, thought to be CO2 emitters, actually provide a substantial negative global feedback to atmospheric CO2 and climate change, ….. up to 60% of the present-day terrestrial sink is caused by increasing atmospheric CO2. In human language this means that coal fired power plants can make trees thrive.

The paper states this contributes the second-largest uncertainty to projections of future climate.

Align this with the intense US federal government’s efforts to destroy carbon combustion in America, particularly our coal based energy infrastructure. In late 2014, we learn that these emissions aid, not injure rain forest growth. Analyze these facts word by word.

2014, not 1980. There are thousands of coal fired facilities that were not built in the US. They were built off shore, and contributed in large measure to the reason why China is the largest economy on earth and why two generations of Americans in the smoke stack industries suffered unemployment and zero income growth.

We learn, from a NASA scientist, not the Koch brothers, that CO2 emissions can be, or are, a great benefit to the environment. e.g. rain forests.

These facts cast a dark shadow over the EPA Clean Power program. Its bedrock foundation just cracked. From a policy viewpoint, no one technical paper should endanger our survival but it does.

What an extraordinary thing to say! Your science is so dodgy, it’s hard to know where to begin. So you’re saying that a) more carbon in the atmosphere is good for the environment; b) China is doing well economically because they have more smokestacks. Amazing. I’m going to hit the cigarettes big time because they’ll make healthier.

The dodgy science comes, not from me, but from Dr. Schimeil et al. in Nov 2014. You can begin by refuting their finding: CO2 emissions are good for the rain forests as they are a sink, nor a source. If true, it kicks the legs out of the EPA position, and the effort to destroy the largest source of America’s electric energy supply.

You can also refute a basic economic metric: per capita consumption of energy is perhaps the best measurement of a society’s advancement. It rivals nutrient intake. China has gained several centuries on the US in the last two generations, by both measurements. She puts a new large coal plant on line every few days as she becomes an economic giant. She burns four times as much carbon as the US, will not stop based on Obama’s agreement, and apparently is improving the rain forests as a result.

This ranks as the most important energy finding of 2014. Our survival, and the rain forests are at stake.

Your views about smoking does not make the cut. I suggest you read more on energy, or learn to speak Mandarin.

I have always believed that we should be focused on “clean air to breathe and water to drink for everyone on our planet”. That is probably something a lot more people might support regardless of their political persuasions or belief structures. Probably also far more understandable to more people than 400 ppm of CO2 on a mountaintop in Hawaii.

I’d be remiss in not mentioning the good year for biofuel. Four plants currently in production of cellulosic ethanol five with Brazil. Seventy percent of new car fleet approved for E15 fuel. Syngenta seed company has a custom corn plant that contains a microbial gene which when utilized within ethanol process eliminates the expensive commercial enzyme. The invention provides more revenue for farmers and the better enzyme has reverberated process improvements of which one being the new found ability to process corn kernel cellulose to ethanol and in doing so, double biodiesel corn production. This technology is expected to be quickly adapted by most processors. More success within R & D efforts. Pilot stage and production partners working on new process to reduce dehydration and distill cost by 80%. Perdue University developed new process for conversion of lignin that otherwise goes to low value coal like boiler production of energy. Cellulose material first treated to heat and pressure process that dissolves lignin portion, thus freeing up all sugars for traditional ethanol process. The lignin chemically converted to valuable commercial chemicals that can be utilized for flavorings, gasoline, or jet fuel.
Petrol’s expensive assault per multi-prong attack seems to have faded within increased awareness, science, economics, and reality. Most doubt the validity of the food cost argument as well as harming engines. Blend wall argument just another bump that was “created” upon purposeful inaction. It is expected no or minor adjustment only to RFS. regulation that has served to the public good. Some petrol companies such as Shell very active in R&D endeavors of biofuel. One interesting development that may be bellwether solution to coal power regulation problems. A North Dakota Cooperative has been quietly utilizing CHP process within their coal plants. Either bolt on operation or side by side partnership. We all know the ability to clean coal emissions and do so very effectively. All but CO2 appears to be cost effective. Enter into the equation CHP energy share with ethanol. The power plant gets a bump of 2x efficiency and halves CO2 production in doing so. Ethanol get a bump to easily certify to RFS2 by eliminating heat production. Spirit wood is latest plant.

Some important points to consider when evaluating future of biofuel. Just now the news reported low cost of gasoline per low cost of crude oil. Cost of crude oil is 2/3 the cost making gasoline. So, not much wiggle room for improvement, right? Also, the cost of crude oil will increase as the easy recoverable sources dry up. Compare that hard fact to ethanol wherein $4 bushel corn produces 4 gallons of fuel, valuable distillery grains, biodiesel fuel, glycerin and other various co-products such as food. Lots of wiggle room to improve processing cost. Cellulosic has even greater wiggle room.

What an interesting year. I also listened to the 60 minutes segment again. Wow …87% of primary energy. That motivated me to check the 2014 BP statistical review to see how low carbon energy was growing relative to total energy. Non-hydro renewables gained three tenths of a percent ~ (1.9% to 2.2%). Nuclear held steady at ~ 4.4% …don’t see how we can get there from here.

Neither do I. The BP data shows that global biofuels consumption, as a percent of oil consumption, grew rapidly from 0.3% in 2000 to 1.5% in 2010, but has stayed at that 1.5% level since. So that was the Bioeconomy Revolution? 1.5%? And I don’t see what will drive much more biofuels market penetration. Instead of biofuels displacing oil consumption, they are just adding a little volume to the world’s huge and growing appetite for oil. We are still as dependent on oil as ever, and will be for decades to come, it seems.

An important U.S. energy story that has no indication of abating. Environmental activism that continues to cloud and direct energy decision making per popularity contest of ill informed public. Energy sector is pushed to utilize mass media to gain market share. Present day we suffer from lack of leadership and good governance that would work in public’s best interest to dispel popular beliefs and utilize science, economics, and capital requirements for directing energy future per tangible budget constraints in this day of deficit spending and lesson ability to do such spending in future. We only read tweets of “wind and solar energy is free” and fossil fuel fear mongering. Mean while the most obvious solutions gets push to side as voting public is holding firm to misconceptions. So, the U.S. won’t lead the world per wise environmental decision making. Were held hostage to preconceived sugar plumb fantasies of Utopian energy supply dreams. China is in captains seat to steer to good decisions that make for balanced utilization of best in class solutions for economy. Their nuclear construction is on track to be highest in international efforts. Same with cheap and available hydro. Wind and solar to gain, but the country isn’t held hostage by the sector fantasy. The far east region is expected to surpass Brazil with ample feed stork for biofuel. Biofuel and biomass extremely useful to nations with employment needs and desires to contribute to environmental benefits. Remote energy production very attractive with huge labor needs. Common wood energy is estimated to provide 7% international energy. This environmental positive energy sector could easily bump up efficiency and utilization with modest conservation education and better technology. Hydro is already supplying the major share of U.S. renewable energy. Modern engineering and renovation could double the figure with trade off of benefits. Public support is within 90 percentile, yet political leadership afraid of activist anger to accomplish much of anything. Again, the international community will quickly surpass U.S. inaction. Our engineering and manufacturing at best maintained by off shore action.

What is sad concerning wind energy. The attempt to utilize the power results in making the rest of grid less efficient. Wind energy is not dispatchable, predicable, and not stable. Other power plants must operate below capacity at less efficiency and be ready at the draw for eventual hiccup of wind.

Solar also craps out upon evening peak power needs and is unavailable for morning peak energy. Proponents claim we only need power storage technique to make these two power sources effective, well that the case to make the grid we have effective as well, so where’s the beef?

I think the environmentalist are pushing country to rabbit hole solutions that lead to not so good economic results.

Technology trends to watch; seems were neck deep in the biological revolution. Utilizing the biological world to produce energy and chemicals. Biofuel is set to benefit from engineered feed stocks that maximize growth, tonnage per acre, and quality of material. The processing improvements to convert traditional feed stocks is running head long into biological improvement to make the job easier. Also, the technology to convert ethanol processing plants to bio process plants that have flexibility to produce a larger variety of products of which include food, fuel, feed, pure CO2, plastic feed stock, and other various chemicals. Add to the list companies like Vertimass that has technology to convert or strip ethanol per catalytic process to gasoline, jet fuel, or diesel fuel. They claim to achieved a process that will be adapted by ethanol processors as they would achieve maximum process flexibility to sell wares per market demand.

Technology to watch. Opposed piston technology such as Achates two stroke that is positioned with EPA certification to meet future strict diesel emissions 2025. The engine is smaller, lighter and boosts efficiency 30%. The opposed piston has advantages for high compression engines in that the stroke is one half that of single piston to achieve same compression ratio. This makes the engine efficient per ability to rev higher and achieves decrease in engine friction per lower crank angle (piston scrubbing cylinder sidewall). So, higher compression of ethanol over and above diesel will improve that fuel’s efficiency. Per Cummins Ethos engine experience the E85 fuel will make inroads per diesel engine and in doing so, bring GHG emissions down 80%. This rate of decline is above battery car on average grid power. Also, the trend to improve vehicle efficiency is making the gasoline engine more expensive per high boost turbo and stronger engines, meaning the engine is becoming diesel quality and cost difference is slimming down. The two stroke is game changer and should make inroads to fleet in near future.

The efficiency of the vehicle fleet and extra cost of vehicles will dampened international fuel needs and offset much of the growth per increased demand from developing economies. Also, playing into this consider the history of Brazil with biofuel. We forget that Brazil has long history and much experience with ethanol fuel. The E85 fuel is popular as well as base fuel of E25. Their car fleet is soon to pass 90% flex. Gasoline is the position of alternative fuel per loss of leadership. Their motorcycles and other small engines operate on E25 and some flex operate on E85. U.S. evaluation of ethanol often appear as “forgetting” another nation has boatload of experience to draw upon. Add to the math of fuel needs, only two nations have invested much in ethanol fuel production, to date. Far East is expected to surpass Brazil in ethanol. Africa has enormous potential. Mexico, Canada, and Europe on path to increase. Cellulosic is just getting kicked into gear and will surpass starch and sugar ethanol production. Farm agronomics and GMO variety expected to greatly increase ethanol feed stock.

Two separate scientific teams concluded that the collapse of the Western Antarctic ice sheet is under way and inevitable, and could ultimately lead to a global sea rise of more than 10 feet.
I read the above link. The scientist put forth a weak study to allow sensational climate headlines. At the end they utilize CYA language such as cause is highly complex and not just per warmer temps. Drastic action to cut GHG emissions of no use. Even if ocean water did not warm and no additional heat provided the chain reaction would continue. The thought is, it’s not a temporary trend, but may raise sea level 1mm per year for 200 years, then accelerate. The process to take 2 to 10 centuries. Does anyone else think they have way overstepped their ability to predict future upon a couple studies? Even 40 year span of tracking some of the ice pack physical presence is shaky science to extrapolate 1,000 years into future. They should couch prognostications per stating that if the trend they observe continues… Much like alarming public that all our water and sand will be gone if shale fracking continues.